Correlation Between Methode Electronics and GameStop Corp
Can any of the company-specific risk be diversified away by investing in both Methode Electronics and GameStop Corp at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Methode Electronics and GameStop Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Methode Electronics and GameStop Corp, you can compare the effects of market volatilities on Methode Electronics and GameStop Corp and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Methode Electronics with a short position of GameStop Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Methode Electronics and GameStop Corp.
Diversification Opportunities for Methode Electronics and GameStop Corp
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Methode and GameStop is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Methode Electronics and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp and Methode Electronics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Methode Electronics are associated (or correlated) with GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of Methode Electronics i.e., Methode Electronics and GameStop Corp go up and down completely randomly.
Pair Corralation between Methode Electronics and GameStop Corp
Assuming the 90 days trading horizon Methode Electronics is expected to under-perform the GameStop Corp. But the stock apears to be less risky and, when comparing its historical volatility, Methode Electronics is 1.96 times less risky than GameStop Corp. The stock trades about -0.04 of its potential returns per unit of risk. The GameStop Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,020 in GameStop Corp on October 13, 2024 and sell it today you would earn a total of 1,133 from holding GameStop Corp or generate 56.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Methode Electronics vs. GameStop Corp
Performance |
| Timeline |
| Methode Electronics |
| GameStop Corp |
Methode Electronics and GameStop Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Methode Electronics and GameStop Corp
The main advantage of trading using opposite Methode Electronics and GameStop Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Methode Electronics position performs unexpectedly, GameStop Corp can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in GameStop Corp will offset losses from the drop in GameStop Corp's long position.| Methode Electronics vs. Molina Healthcare | Methode Electronics vs. US Physical Therapy | Methode Electronics vs. X FAB Silicon Foundries | Methode Electronics vs. TRI CHEMICAL LABORATINC |
| GameStop Corp vs. LPKF Laser Electronics | GameStop Corp vs. BJs Restaurants | GameStop Corp vs. Methode Electronics | GameStop Corp vs. FIH MOBILE |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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